Tesla shares dip after Elon Musk proposes going private

Danny Moloshok  Reuters

Tesla has moved to further formalise the prospect of the electric auto company undergoing a buyout with a statement from the company's directors.

Tesla Inc.'s board confirmed it knew last week about Elon Musk's proposal to take the electric-car maker private, adding credence to the idea that this was more than a spur-of-the-moment whim from the notoriously impulsive billionaire. In its statement, the board said the company's chief executive had "addressed the funding for this to occur".

The board had "met several times over the last week" to discuss going private, the statement said.

The issue of share accumulation by outsiders emerged only recently as reports that Saudi Arabia's public investment fund had built up a stake from 3 to 5 percent after its offers of purchase of new shares in Tesla were spurned by the company.

Elon Musk's tweets early on Tuesday caused plenty of speculation and controversy.

Tesla CEO Elon Musk tweeted Tuesday that he's is mulling taking Tesla private at US$420 a share.

Tesla's shares were down less than one per cent at $376.31 USA in morning trading on Wednesday after closing up 11 per cent at $379.57 U.S. on Tuesday.

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In a later statement to employees and posted on Tesla's blog, Musk explained: "Being public. subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term".

Most analysts were skeptical, but some said a deal could materialize if Musk succeeded in lining up the right funding.

JPMorgan analyst Ryan Brinkman said he gave only a 50 per cent probability that Tesla would go private.

The "short burn of the century" that Elon Musk promised back in May might have finally happened. And as the stock price has climbed this year, so too have the bets against it.

"Just because" Musk wants it at $420 "doesn't mean that there aren't other people who might be willing to come in with another transaction that would be more beneficial to shareholders", Pitt said.

"This proposal to go private would ultimately be finalized through a vote of our shareholders", Musk said in explaining the potential move.

Musk holds "about 20 percent of the company now", the statement said, and made clear that he doesn't see that changing whether Tesla is private or public.

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